NAMIC Comment-NAIC Cat Plan

Date: January 7, 2006 To: Eric Nordman, Director of Research, National Association of Insurance Commissioners From: Robert Detlefsen, Director of Public Policy, National Association of Mutual Insurance Companies Subject: Comment on the NAIC’s Proposed Natural Catastrophe Risk Plan The 2005 Gulf Coast hurricanes and their aftermath have stimulated an important national conversation about the efficacy of our current system for managing and financing natural catastrophe risk. The question facing policymakers and leaders in the private sector is, What public and private initiatives are needed mitigate and finance risk stemming from large-scale disasters? In answer to this question, the NAIC has drafted a ten-page white paper that proposes an 1ambitious “comprehensive national plan” for managing natural catastrophe risk. In addition to asserting that “cost-effective steps should be taken to mitigate potential losses,” the paper declares that “the way insurance benefits are delivered to the public needs to be revisited.” Elaborating on this point, the paper observes: Clearly, having disputes over whether a loss is attributable to wind or water is not what the public has in mind when they purchase insurance for their homes. The policyholders simply want to buy a policy that provides them with peace of mind and pays for their loss, minus some reasonable deductibles or co-payments, when bad things occur. The insurance industry needs to ...